The Australian Financial Review reported on March 21 that the Australian Prudential Regulation Authority (APRA) had asked banks to say how much risk they had with startups and crypto-related companies.
Three people with knowledge of the situation told the Financial Review that the regulator told banks to improve their reports on crypto assets and give the APRA updates daily. Sources say that the agency wants to learn more about how banks are exposed to cryptocurrencies and the risks that come with them.
The new steps seem to be part of the APRA’s plan to keep a closer eye on the banking sector after recent major global bank failures. After Credit Suisse went out of business over the weekend, the UBS Group agreed on March 19 to buy its failing competitor for $3.2 billion. After SVB and Silvergate, the acquisition was one of the worst things to happen in the financial industry in recent years.
Barrenjoey analyst Jonathan Mott reportedly told clients in a note that the situation for Australian banks “remains stable” but cautioned that confidence could be rapidly shaken, putting pressure on bank margins.
“Our channel checks indicate deposits are not being withdrawn from smaller institutions in any size, and capital and liquidity buffers are strong,” Mott said, adding, “But this is a crisis of confidence and credit spreads and cost of capital will continue to rise. At a minimum, this will add to the margin pressure the banks are facing, while credit quality will continue to deteriorate.”
The announcement was made shortly after the Australian Banking Association initiated a cost of living inquiry to examine the effects of the COVID-19 pandemic and geopolitical tensions on Australians. An analysis of rising inflation suggested that over 186 U.S. institutions risk a similar closure if depositors withdraw all funds.